Honolulu Airlines flies only one route: Chicago-Honolulu. The demand for each flight is Q = 500- P. HA’s cost of running each flight is $41,000 plus $100 per passenger. 1. What is the profit maximizing price that HA will charge if the market is a monopoly? How many people will be on each flight? What is HA’s profit for each flight? Will the airline stay in business? 2. HA finds out that two different types of people fly to Honolulu. Type A consists of business people with a demand of QA = 260 - 0.4P.Type B consists of students whose total demand is QB = 240 - 0.6P. Because the students are easy to spot, HA decides to charge each group different prices. Graph each of these demand curves and their horizontal sum (the market demand curve). What price does HA charge the students? What price does it charge to business customers? 3. What would HA’s profit be for each flight? Would the airline stay in business? Calculate the consumer surplus of each group. What is the total CS? 4. Before HA started price discrimination, how much CS was the Type A getting? What about Type B? Why did total CS decline with price discrimination? In our price discrimination worksheet, the CS was higher with third degree price discrimination. Explain the discrepancy between the two results. ANSWER ALL PARTS PLEASE
Honolulu Airlines flies only one route: Chicago-Honolulu. The demand for each flight is Q = 500- P. HA’s cost of running each flight is $41,000 plus $100 per passenger.
1. What is the profit maximizing price that HA will charge if the market is a
2. HA finds out that two different types of people fly to Honolulu. Type A consists of business people with a demand of QA = 260 - 0.4P.Type B consists of students whose total demand is QB = 240 - 0.6P. Because the students are easy to spot, HA decides to charge each group different prices. Graph each of these demand curves and their horizontal sum (the market demand curve). What price does HA charge the students? What price does it charge to business customers?
3. What would HA’s profit be for each flight? Would the airline stay in business? Calculate the
surplus of each group. What is the total CS?
4. Before HA started
ANSWER ALL PARTS PLEASE
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